ROYAL GOLD INC 10-Q

ITEM 1. FINANCIAL STATEMENTS ​ ROYAL GOLD, INC. Consolidated Balance Sheets (Unaudited, amounts in thousands except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ 2022 2021 ASSETS ​ ​ ​ ​ ​ ​ Cash and equivalents ​ $ 183,707 ​ $ 143,551 Royalty receivables ​ ​ 53,518 ​ ​ 54,088 Income tax receivable ​ ​ 4,397 ​ ​ 4,915 Stream inventory ​ ​ 8,490 ​ ​ 11,607 Prepaid expenses and other ​ ​ 8,533 ​ ​ 1,835 Total current assets ​ ​ 258,645 ​ ​ 215,996 Stream and royalty interests, net (Note 3) ​ ​ 2,433,689 ​ ​ 2,443,752 Other assets ​ ​ 97,518 ​ ​ 97,284 Total assets ​ $ 2,789,852 ​ $ 2,757,032 LIABILITIES ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 6,267 ​ $ 6,475 Dividends payable ​ ​ 22,984 ​ ​ 22,966 Income tax payable ​ ​ 8,160 ​ ​ 19,070 Other current liabilities ​ ​ 12,132 ​ ​ 12,917 Total current liabilities ​ ​ 49,543 ​ ​ 61,428 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities ​ ​ 87,760 ​ ​ 87,705 Other liabilities ​ ​ 6,435 ​ ​ 6,688 Total liabilities ​ ​ 143,738 ​ ​ 155,821 Commitments and contingencies (Note 12) ​ ​ ​ ​ ​ ​ EQUITY ​ ​ ​ ​ ​ ​ Preferred stock, $ .01 par value, 10,000,000 shares authorized; and 0 shares issued ​ ​ — ​ ​ — Common stock, $ .01 par value, 200,000,000 shares authorized; and 65,568,799 and 65,564,364 shares outstanding, respectively ​ ​ 656 ​ ​ 656 Additional paid-in capital ​ ​ 2,208,425 ​ ​ 2,206,159 Accumulated earnings ​ ​ 424,608 ​ ​ 381,929 Total Royal Gold stockholders’ equity ​ ​ 2,633,689 ​ ​ 2,588,744 Non-controlling interests ​ ​ 12,425 ​ ​ 12,467 Total equity ​ ​ 2,646,114 ​ ​ 2,601,211 Total liabilities and equity ​ $ 2,789,852 ​ $ 2,757,032 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 3 Table of Contents ROYAL GOLD, INC. Consolidated Statements of Operations and Comprehensive Income (Unaudited, amounts in thousands except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ March 31, ​ 2022 2021 Revenue (Note 6) ​ $ 162,355 ​ $ 142,589 ​ ​ ​ ​ ​ ​ ​ Costs and expenses ​ ​ ​ ​ ​ ​ Cost of sales (excludes depreciation, depletion and amortization) ​ ​ 22,639 ​ ​ 21,469 General and administrative ​ ​ 8,931 ​ ​ 6,932 Production taxes ​ ​ 2,221 ​ ​ 1,835 Depreciation, depletion and amortization ​ ​ 47,988 ​ ​ 41,296 Total costs and expenses ​ ​ 81,779 ​ ​ 71,532 ​ ​ ​ ​ ​ ​ ​ Operating income ​ ​ 80,576 ​ ​ 71,057 ​ ​ ​ ​ ​ ​ ​ Fair value changes in equity securities ​ ​ 613 ​ ​ 1,902 Interest and other income ​ ​ 975 ​ ​ 733 Interest and other expense ​ ​ ( 898 ) ​ ​ ( 1,820 ) Income before income taxes ​ ​ 81,266 ​ ​ 71,872 ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ ​ ( 15,304 ) ​ ​ ( 17,679 ) Net income and comprehensive income ​ ​ 65,962 ​ ​ 54,193 Net income and comprehensive income attributable to non-controlling interests ​ ​ ( 287 ) ​ ​ ( 167 ) Net income and comprehensive income attributable to Royal Gold common stockholders ​ $ 65,675 ​ $ 54,026 Net income per share attributable to Royal Gold common stockholders: ​ ​ ​ ​ ​ ​ Basic earnings per share ​ $ 1.00 ​ $ 0.82 Basic weighted average shares outstanding ​ ​ 65,565,735 ​ ​ 65,550,400 Diluted earnings per share ​ $ 1.00 ​ $ 0.82 Diluted weighted average shares outstanding ​ ​ 65,644,668 ​ ​ 65,621,603 Cash dividends declared per common share ​ $ 0.35 ​ $ 0.30 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 4 Table of Contents ROYAL GOLD, INC. Consolidated Statements of Changes in Stockholders’ Equity Three months ended March 31, 2022, and 2021 (unaudited, amounts in thousands except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Royal Gold Stockholders ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Shares ​ Paid-In ​ Accumulated ​ Non-controlling ​ Total ​ ​ Shares ​ Amount ​ Capital ​ Earnings ​ Interests ​ Equity Balance at December 31, 2021 65,564,364 ​ $ 656 $ 2,206,159 ​ $ 381,929 ​ $ 12,467 ​ $ 2,601,211 Stock-based compensation and related share issuances 4,435 ​ — 2,266 ​ — ​ — ​ 2,266 Distributions to non-controlling interests ​ — ​ — — ​ — ​ ( 329 ) ​ ( 329 ) Net income and comprehensive income — ​ — — ​ 65,675 ​ 287 ​ 65,962 Dividends declared — ​ — — ​ ( 22,996 ) ​ — ​ ( 22,996 ) Balance at March 31, 2022 65,568,799 ​ $ 656 $ 2,208,425 ​ $ 424,608 ​ $ 12,425 ​ $ 2,646,114 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Royal Gold Stockholders ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Shares ​ Paid-In ​ Accumulated ​ Non-controlling ​ Total ​ ​ Shares ​ Amount ​ Capital ​ Earnings ​ Interests ​ Equity Balance at December 31, 2020 65,548,415 ​ $ 656 $ 2,201,076 ​ $ 189,910 ​ $ 13,037 ​ $ 2,404,679 Stock-based compensation and related share issuances 2,030 ​ — 1,334 ​ — ​ — ​ 1,334 Distributions to non-controlling interests ​ — ​ — — ​ — ​ ( 399 ) ​ ( 399 ) Net income and comprehensive income — ​ — — ​ 54,026 ​ 167 ​ 54,193 Dividends declared — ​ — — ​ ( 19,682 ) ​ — ​ ( 19,682 ) Balance at March 31, 2021 65,550,445 ​ $ 656 $ 2,202,410 ​ $ 224,254 ​ $ 12,805 ​ $ 2,440,125 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 5 Table of Contents ROYAL GOLD, INC. Consolidated Statements of Cash Flows (Unaudited, amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ March 31, ​ 2022 2021 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income and comprehensive income ​ $ 65,962 ​ $ 54,193 Adjustments to reconcile net income and comprehensive income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation, depletion and amortization ​ ​ 47,988 ​ ​ 41,296 Non-cash employee stock compensation expense ​ ​ 2,124 ​ ​ 1,344 Fair value changes in equity securities ​ ​ ( 613 ) ​ ​ ( 1,902 ) Deferred tax expense (benefit) ​ ​ 688 ​ ​ ( 645 ) Other ​ ​ 245 ​ ​ 286 Changes in assets and liabilities: ​ ​ ​ ​ ​ ​ Royalty receivables ​ ​ 569 ​ ​ ( 1,111 ) Stream inventory ​ ​ 3,118 ​ ​ ( 591 ) Income tax receivable ​ ​ 518 ​ ​ ( 5,731 ) Prepaid expenses and other assets ​ ​ ( 7,309 ) ​ ​ 98 Accounts payable ​ ​ ( 208 ) ​ ​ 1,793 Income tax payable ​ ​ ( 10,910 ) ​ ​ 2,342 Uncertain tax positions ​ ​ — ​ ​ ( 310 ) Other liabilities ​ ​ ( 1,039 ) ​ ​ 1,171 Net cash provided by operating activities ​ $ 101,133 ​ $ 92,233 ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Acquisition of stream and royalty interests ​ ​ ( 37,800 ) ​ ​ ( 33,656 ) Other ​ ​ ( 11 ) ​ ​ ( 87 ) Net cash used in investing activities ​ $ ( 37,811 ) ​ $ ( 33,743 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Repayment of debt ​ ​ — ​ ​ ( 50,000 ) Net payments from issuance of common stock ​ ​ 141 ​ ​ ( 10 ) Common stock dividends ​ ​ ( 22,978 ) ​ ​ ( 19,682 ) Other ​ ​ ( 329 ) ​ ​ ( 397 ) Net cash used in financing activities ​ $ ( 23,166 ) ​ $ ( 70,089 ) Net increase (decrease) in cash and equivalents ​ ​ 40,156 ​ ​ ( 11,599 ) Cash and equivalents at beginning of period ​ ​ 143,551 ​ ​ 381,859 Cash and equivalents at end of period ​ $ 183,707 ​ $ 370,260 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 6 Table of Contents ROYAL GOLD, INC. Notes to Consolidated Financial Statements (Unaudited) 1. OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS ​ Royal Gold Inc., together with its subsidiaries (“Royal Gold,” the “Company,” “we,” “us,” or “our”), is engaged in the business of acquiring and managing precious metals streams, royalties and similar interests. We seek to acquire existing stream and royalty interests or to finance projects that are in production or in the development stage in exchange for stream or royalty interests. A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine at a price determined for the life of the transaction by the purchase agreement. Royalties are non-operating interests in a mining project that provide the right to revenue or metals produced from the project after deducting contractually specified costs, if any. ​ Summary of Significant Accounting Policies ​ The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair presentation of our interim financial statements have been included in this Form 10-Q. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2022. These interim unaudited consolidated financial statements should be read in conjunction with our Transition Report on Form 10-K for the six months ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on February 17, 2022 (“Transition Report”). ​ Recent Accounting Standards ​ We have evaluated all the recently issued, but not yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board or other standards-setting bodies through the filing date of these unaudited consolidated financial statements and do not believe the future adoption of any such standards will have a material impact on our consolidated financial statements. ​ 2. ACQUISITIONS ​ Lawyers Royalty Acquisition ​ On March 24, 2022, we acquired a 0.5 % net smelter returns royalty (“NSR”) on production from the Lawyers Project, currently operated by Benchmark Metals Inc., which is located in British Columbia, Canada. As part of this transaction, we also acquired a right of first offer (“ROFO”) for an existing 2.0 % NSR royalty over the Ranch Project that is located adjacent to the Lawyers Project. We paid $ 8.0 million in cash consideration for the royalty and ROFO to Guardsmen Resources Inc. The Lawyers Project acquisition has been accounted for as an asset acquisition. The $ 8.0 million cash consideration, plus direct acquisition costs, have been recorded as an exploration stage royalty interest (Note 3) within Stream and royalty interests, net on our consolidated balance sheets. ​ Khoemac a u Silver Stream ​ On February 23, 2022, we made an advance payment of $ 10.0 million toward the option stream which increased our right to receive payable silver produced from Khoemac a u from 90 % to 93 %, and on March 14, 2022, we made our final advance payment of $ 16.5 million toward the option stream which increased our right to receive payable silver produced from 93 % to 100 %. The $ 265 million of advance payments, plus direct acquisition costs, have been recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets. ​ As of March 31, 2022, $ 25.0 million of the subordinated debt facility, and $ 2.6 million of accrued interest remains outstanding on the Khoemac a u subordinated debt facility, and these amounts are included in Other assets in our 7 Table of Contents ROYAL GOLD, INC. Notes to Consolidated Financial Statements (Unaudited) ​ consolidated balance sheets. Refer to our Transition Report for further details on the Khoemac a u silver stream acquisition and subordinated debt facility. ​ 3. STREAM AND ROYALTY INTERESTS, NET ​ The following tables summarize our stream and royalty interests, net as of March 31, 2022 and December 31, 2021. ​ Click or tap here to enter text. ​ ​ ​ ​ ​ ​ ​ ​ ​ As of March 31, 2022 (Amounts in thousands): Cost Accumulated Depletion Net Production stage stream interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ Mount Milligan ​ $ 790,635 ​ $ ( 352,165 ) ​ $ 438,470 Pueblo Viejo ​ ​ 610,405 ​ ​ ( 267,872 ) ​ ​ 342,533 Andacollo ​ ​ 388,182 ​ ​ ( 143,144 ) ​ ​ 245,038 Khoemac a u ​ ​ 265,911 ​ ​ ( 4,963 ) ​ ​ 260,948 Rainy River ​ ​ 175,727 ​ ​ ( 53,285 ) ​ ​ 122,442 Wassa ​ ​ 146,475 ​ ​ ( 87,597 ) ​ ​ 58,878 Other ​ ​ 69,100 ​ ​ ( 6,254 ) ​ ​ 62,846 Total production stage stream interests ​ ​ 2,446,435 ​ ​ ( 915,280 ) ​ ​ 1,531,155 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production stage royalty interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ Voisey's Bay ​ ​ 205,724 ​ ​ ( 115,738 ) ​ ​ 89,986 Red Chris ​ ​ 116,187 ​ ​ ( 1,797 ) ​ ​ 114,390 Peñasquito ​ ​ 99,172 ​ ​ ( 54,243 ) ​ ​ 44,929 Cortez ​ ​ 80,681 ​ ​ ( 26,693 ) ​ ​ 53,988 Other ​ ​ 447,014 ​ ​ ( 390,227 ) ​ ​ 56,787 Total production stage royalty interests ​ ​ 948,778 ​ ​ ( 588,698 ) ​ ​ 360,080 Total production stage stream and royalty interests ​ ​ 3,395,213 ​ ​ ( 1,503,978 ) ​ ​ 1,891,235 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Development stage stream interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ 12,038 ​ ​ — ​ ​ 12,038 Development stage royalty interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ Côté ​ ​ 45,421 ​ ​ — ​ ​ 45,421 Other ​ ​ 62,797 ​ ​ — ​ ​ 62,797 Total development stage stream and royalty interests ​ ​ 120,256 ​ ​ — ​ ​ 120,256 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exploration stage stream interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ NX Gold ​ ​ 34,213 ​ ​ — ​ ​ 34,213 Exploration stage royalty interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ Pascua-Lama ​ ​ 177,690 ​ ​ — ​ ​ 177,690 Red Chris ​ ​ 48,895 ​ ​ — ​ ​ 48,895 Côté ​ ​ 29,610 ​ ​ ​ ​ ​ 29,610 Other ​ ​ 131,790 ​ ​ — ​ ​ 131,790 Total exploration stage stream and royalty interests ​ ​ 422,198 ​ ​ — ​ ​ 422,198 Total stream and royalty interests, net ​ $ 3,937,667 ​ $ ( 1,503,978 ) ​ $ 2,433,689 ​ 8 Table of Contents ROYAL GOLD, INC. Notes to Consolidated Financial Statements (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2021 (Amounts in thousands): Cost Accumulated Depletion ​ Net Production stage stream interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ Mount Milligan ​ $ 790,635 ​ $ ( 336,921 ) ​ $ 453,714 Pueblo Viejo ​ ​ 610,405 ​ ​ ( 260,321 ) ​ ​ 350,084 Andacollo ​ ​ 388,182 ​ ​ ( 139,035 ) ​ ​ 249,147 Khoemac a u ​ ​ 239,411 ​ ​ ( 3,402 ) ​ ​ 236,009 Rainy River ​ ​ 175,727 ​ ​ ( 50,115 ) ​ ​ 125,612 Wassa ​ ​ 146,475 ​ ​ ( 84,915 ) ​ ​ 61,560 Other ​ ​ 69,101 ​ ​ ( 4,193 ) ​ ​ 64,908 Total production stage stream interests ​ ​ 2,419,936 ​ ​ ( 878,902 ) ​ ​ 1,541,034 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production stage royalty interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ Voisey's Bay ​ ​ 205,724 ​ ​ ( 113,602 ) ​ ​ 92,122 Red Chris ​ ​ 116,187 ​ ​ — ​ ​ 116,187 Peñasquito ​ ​ 99,172 ​ ​ ( 53,022 ) ​ ​ 46,150 Cortez ​ ​ 80,681 ​ ​ ( 23,225 ) ​ ​ 57,456 Other ​ ​ 447,799 ​ ​ ( 387,364 ) ​ ​ 60,435 Total production stage royalty interests ​ ​ 949,563 ​ ​ ( 577,213 ) ​ ​ 372,350 Total production stage stream and royalty interests ​ ​ 3,369,499 ​ ​ ( 1,456,115 ) ​ ​ 1,913,384 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Development stage stream interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ 12,037 ​ ​ — ​ ​ 12,037 Development stage royalty interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ Côté ​ ​ 45,421 ​ ​ — ​ ​ 45,421 Other ​ ​ 54,755 ​ ​ — ​ ​ 54,755 Total development stage stream and royalty interests ​ ​ 112,213 ​ ​ — ​ ​ 112,213 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exploration stage stream interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ NX Gold ​ ​ 30,974 ​ ​ — ​ ​ 30,974 Exploration stage royalty interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ Pascua-Lama ​ ​ 177,690 ​ ​ — ​ ​ 177,690 Red Chris ​ ​ 48,895 ​ ​ — ​ ​ 48,895 Côté ​ ​ 29,610 ​ ​ — ​ ​ 29,610 Other ​ ​ 130,986 ​ ​ — ​ ​ 130,986 Total exploration stage royalty interests ​ ​ 418,155 ​ ​ — ​ ​ 418,155 Total stream and royalty interests, net ​ $ 3,899,867 ​ $ ( 1,456,115 ) ​ $ 2,443,752 ​ ​ ​ 4. MARKETABLE EQUITY SECURITIES ​ As of March 31, 2022, our marketable equity securities include warrants to purchase up to 19,640,000 common shares of TriStar Gold Inc. Our marketable equity securities are measured at fair value (Note 11) each reporting period with any changes in fair value recognized in net income. ​ The fair value of our marketable equity securities increased $ 0.6 million and $ 1.9 million for the three months ended March 31, 2022, and 2021, respectively, and these changes are included in Fair value changes in equity securities on our consolidated statements of operations and comprehensive income. The carrying value of our marketable equity securities as of March 31, 2022 and December 31, 2021, was $ 2.3 million and $ 1.7 million, respectively, and is included in Other assets on our consolidated balance sheets. ​ ​ 9 Table of Contents ROYAL GOLD, INC. Notes to Consolidated Financial Statements (Unaudited) ​ 5. DEBT ​ Revolving credit facility ​ As of March 31, 2022, we had no amounts outstanding under our revolving credit facility dated June 2, 2017, and as amended. Interest expense recognized on the revolving credit facility for the three months ended March 31, 2022, and 2021, was approximately $ 0.2 million and $ 0.8 million, respectively, and included the amortization of the debt issuance costs and interest on the outstanding borrowings. We were in compliance with each financial covenant (leverage ratio and interest coverage ratio) under the revolving credit facility as of March 31, 2022. ​ We may repay any borrowings under the revolving credit facility at any time without premium or penalty. ​ 6. REVENUE ​ Revenue Recognition ​ A performance obligation is a promise in a contract to transfer control of a distinct good or service (or integrated package of goods and/or services) to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, a performance obligation is satisfied. In accordance with this guidance, revenue attributable to our stream interests and royalty interests is generally recognized at the point in time that control of the related metal production transfers to our customers. The amount of revenue we recognize further reflects the consideration to which we are entitled under the respective stream or royalty agreement. A more detailed summary of our revenue recognition policies for our stream and royalty interests is discussed below. ​ Stream Interests ​ A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more of the metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Gold, silver and copper received under our metal streaming agreements are taken into inventory, and then sold primarily using average spot rate gold, silver and copper forward contracts. The sales price for these average spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a consecutive number of trading days between ten days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policy in effect at the time) commencing shortly after receipt and purchase of the metal. We settle our forward sales contracts via physical delivery of the metal to the purchaser (our customer) on the settlement date specified in the contract. Under our forward sales contracts, there is a single performance obligation to sell a contractually specified volume of metal to the purchaser, and we satisfy this obligation at the point in time of physical delivery. Accordingly, revenue from our metal sales is recognized on the date of settlement, which is the date that control, custody and title to the metal transfer to the purchaser. ​ Royalty Interests ​ Royalties are non-operating interests in mining projects that provide the right to a percentage of revenue or metals produced from the project after deducting specified costs, if any. We are entitled to payment for our royalty interest in a mining project based on a contractually specified commodity price (for example, a monthly or quarterly average spot price) for the period in which metal production occurs. As a royalty holder, we act as a passive entity in the production and operations of the mining project, and the third-party operator of the mining project is responsible for all mining activities, including subsequent marketing and delivery of all metal production to their ultimate customer. In all of our material royalty interest arrangements, we have concluded that we transfer control of our interest in the metal production to the operator at the point at which production occurs, and thus, the operator is our customer. We have further determined that the transfer of each unit of metal production comprising our royalty interest to the operator represents a separate performance obligation under the contract, and each performance obligation is satisfied at the point in time of metal production by the operator. Accordingly, we recognize revenue attributable to our royalty interests in the period in which metal production occurs at the specified commodity price per the agreement, net of any contractually allowable costs. ​ 10 Table of Contents ROYAL GOLD, INC. Notes to Consolidated Financial Statements (Unaudited) ​ Royalty Revenue Estimates ​ For a small number of our royalty interests, we may not receive, or be entitled to receive, payment information, including production information from the operator, for the period in which metal production occurred prior to issuance of our financial statements for that period. As a result, we may estimate revenue for these royalties based on available information, including public information, from the operator. If adequate information is not available from the operator or from other public sources before we issue our financial statements, we will recognize royalty revenue during the period in which the necessary payment information is received. Differences between estimates and actual amounts could differ significantly and are recorded in the period that the actual amounts are known. Please also refer to our “Use of Estimates” accounting policy discussed in our Transition Report. For the three months ended March 31, 2022, royalty revenue that was estimated or was attributable to metal production for a period prior to March 31, 2022, was not material. ​ Disaggregation of Revenue ​ We have identified two material revenue sources in our business: stream interests and royalty interests. These identified revenue sources are consistent with our reportable segments as discussed in Note 10. ​ Revenue by metal type attributable to each of our revenue sources is disaggregated as follows (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ March 31, March 31, ​ 2022 ​ 2021 Stream revenue: ​ ​ ​ ​ ​ Gold $ 77,502 ​ $ 65,511 Silver ​ 11,439 ​ ​ 12,805 Copper ​ 16,310 ​ ​ 17,030 Total stream revenue $ 105,251 ​ $ 95,346 Royalty revenue: ​ ​ ​ ​ ​ Gold $ 37,917 ​ $ 31,245 Silver ​ 4,317 ​ ​ 4,208 Copper ​ 6,705 ​ ​ 4,015 Other ​ 8,165 ​ ​ 7,775 Total royalty revenue $ 57,104 ​ $ 47,243 Total revenue $ 162,355 ​ $ 142,589 ​ Revenue attributable to our principal stream and royalty interests is disaggregated as follows (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ March 31, March 31, ​ ​ Metal(s) ​ 2022 ​ 2021 Stream revenue: ​ ​ ​ ​ ​ ​ ​ ​ Mount Milligan ​ Gold & Copper ​ $ 42,416 ​ $ 33,803 Pueblo Viejo ​ Gold & Silver ​ ​ 23,264 ​ ​ 30,173 Andacollo ​ Gold ​ ​ 15,674 ​ ​ 13,022 Wassa ​ Gold ​ ​ 7,202 ​ ​ 8,774 Khoemac a u ​ Silver ​ ​ 2,389 ​ ​ — Other ​ Gold & Silver ​ ​ 14,306 ​ ​ 9,574 Total stream revenue ​ ​ ​ $ 105,251 ​ $ 95,346 Royalty revenue: ​ ​ ​ ​ ​ ​ ​ ​ Cortez ​ Gold ​ $ 16,714 ​ $ 8,609 Peñasquito ​ Gold, Silver, Lead & Zinc ​ ​ 13,094 ​ ​ 13,128 Other ​ Various ​ ​ 27,296 ​ ​ 25,506 Total royalty revenue ​ ​ ​ $ 57,104 ​ $ 47,243 Total revenue ​ ​ ​ $ 162,355 ​ $ 142,589 ​ Please refer to Note 10 for the geographical distribution of our revenue by reportable segment. ​ 11 Table of Contents ROYAL GOLD, INC. Notes to Consolidated Financial Statements (Unaudited) ​ 7. STOCK-BASED COMPENSATION ​ We recognized stock-based compensation expense as follows (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ March 31, ​ March 31, ​ ​ 2022 2021 Restricted stock ​ $ 1,155 ​ $ 533 ​ Performance stock ​ ​ 631 ​ ​ 364 ​ Stock appreciation rights ​ ​ 332 ​ ​ 430 ​ Stock options ​ ​ 6 ​ ​ 17 ​ Total stock-based compensation expense ​ $ 2,124 ​ $ 1,344 ​ ​ Stock-based compensation expense is included within General and administrative expense in the consolidated statements of operations and comprehensive income. ​ During the three months ended March 31, 2022 and 2021, we granted the following stock-based compensation awards: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ March 31, ​ ​ March 31, ​ 2022 2021 ​ ​ ​ (Number of shares) Performance stock (at maximum 200 % attainment) ​ ​ 39,380 ​ ​ — Restricted stock ​ ​ 28,220 ​ ​ — Total equity awards granted ​ ​ 67,600 ​ ​ — ​ As of March 31, 2022, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrecognized Weighted- ​ ​ compensation ​ average vesting ​ ​ expense period (years) Restricted stock ​ $ 9,377 ​ ​ 2.6 Performance stock ​ ​ 6,760 ​ ​ 2.5 Stock appreciation rights ​ ​ 1,296 ​ ​ 1.2 Stock options ​ ​ 43 ​ ​ 1.3 ​ ​ 8. EARNINGS PER SHARE (“EPS”) ​ Basic EPS were computed using the weighted average number of shares of common stock outstanding during the period, considering the effect of participating securities. Unvested stock-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of EPS pursuant to the two-class method. Our unvested restricted stock awards contain non-forfeitable dividend rights and participate equally with common stock with respect to dividends issued or declared. Our unexercised stock option awards, unexercised stock-settled stock appreciation rights and unvested performance stock do not contain rights to dividends. Under the two-class method, the earnings used to determine basic EPS are reduced by an amount allocated to participating securities. Use of the two-class method has an immaterial impact on the calculation of basic and diluted EPS. ​ 12 Table of Contents ROYAL GOLD, INC. Notes to Consolidated Financial Statements (Unaudited) ​ The following tables summarize the effects of dilutive securities on diluted EPS for the periods shown below (amounts in thousands, except share data): ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ March 31, ​ March 31, ​ 2022 2021 Net income attributable to Royal Gold common stockholders $ 65,675 ​ $ 54,026 Weighted-average shares for basic EPS ​ 65,565,735 ​ ​ 65,550,400 Effect of other dilutive securities ​ 78,933 ​ ​ 71,203 Weighted-average shares for diluted EPS ​ 65,644,668 ​ ​ 65,621,603 Basic EPS $ 1.00 ​ $ 0.82 Diluted EPS $ 1.00 ​ $ 0.82 ​ ​ 9. INCOME TAXES ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ March 31, ​ March 31, ​ 2022 2021 Income tax expense $ 15,304 ​ $ 17,679 Effective tax rate ​ 18.8 % ​ ​ 24.6 % ​ The effective tax rate for the three months ended March 31, 2021, included an income tax expense attributable to an increase in valuation allowance on certain deferred tax assets. ​ 10. SEGMENT INFORMATION ​ We manage our business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Our long-lived assets (stream and royalty interests, net) are geographically distributed as shown in the following table (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of March 31, 2022 ​ As of December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ Total stream ​ ​ ​ ​ ​ ​ ​ Total stream ​ ​ Stream ​ Royalty ​ and royalty ​ Stream ​ Royalty ​ and royalty ​ interest interest interests, net interest interest interests, net Canada ​ $ 560,911 ​ $ 415,905 ​ $ 976,816 ​ $ 579,326 ​ $ 412,419 ​ $ 991,745 Chile ​ ​ 245,038 ​ ​ 224,116 ​ ​ 469,154 ​ ​ 249,147 ​ ​ 224,116 ​ ​ 473,263 Dominican Republic ​ ​ 342,532 ​ ​ — ​ ​ 342,532 ​ ​ 350,083 ​ ​ — ​ ​ 350,083 Africa ​ ​ 319,827 ​ ​ 321 ​ ​ 320,148 ​ ​ 297,569 ​ ​ 321 ​ ​ 297,890 United States ​ ​ — ​ ​ 103,855 ​ ​ 103,855 ​ ​ — ​ ​ 107,761 ​ ​ 107,761 Mexico ​ ​ — ​ ​ 58,276 ​ ​ 58,276 ​ ​ — ​ ​ 60,977 ​ ​ 60,977 Australia ​ ​ — ​ ​ 27,193 ​ ​ 27,193 ​ ​ — ​ ​ 27,496 ​ ​ 27,496 Rest of world ​ ​ 109,098 ​ ​ 26,617 ​ ​ 135,715 ​ ​ 107,920 ​ ​ 26,617 ​ ​ 134,537 Total ​ $ 1,577,406 ​ $ 856,283 ​ $ 2,433,689 ​ $ 1,584,045 ​ $ 859,707 ​ $ 2,443,752 ​ 13 Table of Contents ROYAL GOLD, INC. Notes to Consolidated Financial Statements (Unaudited) ​ Our reportable segments for purposes of assessing performance are shown below (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2022 ​ Revenue Cost of sales (1) Production taxes Depletion (2) Segment gross profit Stream interests ​ $ 105,251 ​ $ 22,639 ​ $ — ​ $ 36,378 ​ $ 46,234 Royalty interests ​ ​ 57,104 ​ ​ — ​ ​ 2,221 ​ ​ 11,485 ​ ​ 43,398 Total ​ $ 162,355 ​ $ 22,639 ​ $ 2,221 ​ $ 47,863 ​ $ 89,632 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2021 ​ Revenue Cost of sales (1) Production taxes Depletion (2) Segment gross profit Stream interests ​ $ 95,346 ​ $ 21,469 ​ $ — ​ $ 32,595 ​ $ 41,282 Royalty interests ​ ​ 47,243 ​ ​ — ​ ​ 1,835 ​ ​ 8,607 ​ ​ 36,801 Total ​ $ 142,589 ​ $ 21,469 ​ $ 1,835 ​ $ 41,202 ​ $ 78,083 (1) Excludes depreciation, depletion and amortization ​ (2) Depletion amounts are included within Depreciation, depletion and amortization on our consolidated statements of operations and comprehensive income. ​ A reconciliation of total segment gross profit to the consolidated Income before income taxes is shown below (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ March 31, ​ ​ 2022 ​ 2021 Total segment gross profit ​ $ 89,632 ​ $ 78,083 ​ ​ ​ ​ ​ ​ ​ Costs and expenses ​ ​ ​ ​ ​ ​ General and administrative expenses ​ ​ 8,931 ​ ​ 6,932 Depreciation and amortization ​ ​ 125 ​ ​ 94 Operating income ​ ​ 80,576 ​ ​ 71,057 Fair value changes in equity securities ​ ​ 613 ​ ​ 1,902 Interest and other income ​ ​ 975 ​ ​ 733 Interest and other expense ​ ​ ( 898 ) ​ ​ ( 1,820 ) Income before income taxes ​ $ 81,266 ​ $ 71,872 ​ 14 Table of Contents ROYAL GOLD, INC. Notes to Consolidated Financial Statements (Unaudited) ​ Our revenue by reportable segment for the three months ended March 31, 2022 and 2021 is geographically distributed as shown in the following table (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ March 31, ​ 2022 2021 Stream interests: ​ ​ ​ ​ ​ ​ Canada ​ $ 51,485 ​ $ 42,609 Dominican Republic ​ ​ 23,264 ​ ​ 30,173 Chile ​ ​ 15,674 ​ ​ 13,022 Africa ​ ​ 8,446 ​ ​ 9,542 Rest of world ​ ​ 6,382 ​ ​ — Total stream interests ​ $ 105,251 ​ $ 95,346 ​ ​ ​ ​ ​ ​ ​ Royalty interests: ​ ​ ​ ​ ​ ​ United States ​ $ 24,358 ​ $ 16,474 Mexico ​ ​ 15,881 ​ ​ 15,270 Canada ​ ​ 10,778 ​ ​ 8,612 Australia ​ ​ 4,046 ​ ​ 4,360 Africa ​ ​ 316 ​ ​ 748 Rest of world ​ ​ 1,725 ​ ​ 1,779 Total royalty interests ​ $ 57,104 ​ $ 47,243 Total revenue ​ $ 162,355 ​ $ 142,589 ​ ​ 11. FAIR VALUE MEASUREMENTS ​ Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, we utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: ​ Level 1: Quoted prices for identical instruments in active markets; ​ Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and ​ Level 3: Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). ​ The following table sets forth our financial assets measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of March 31, 2022 ​ ​ ​ ​ Fair Value ​ Carrying Value Total Level 1 Level 2 Level 3 Assets (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Marketable equity securities (1) ​ $ 2,346 ​ $ 2,346 ​ $ — ​ $ 2,346 ​ $ — (1) Included in Other assets on our consolidated balance sheets. ​ The TriStar Gold Inc. warrants (Note 4) classified within Level 2 of the fair value hierarchy are model-derived (Black-Scholes) valuations in which the significant inputs are observable in active markets. The carrying value of our revolving credit facility (Note 5) approximates fair value as of March 31, 2022. ​ 15 Table of Contents ROYAL GOLD, INC. Notes to Consolidated Financial Statements (Unaudited) ​ As of March 31, 2022, we had assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis like those associated with stream and royalty interests, intangible assets and other long-lived assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if any of these assets are determined to be impaired. If recognition of these assets at their fair value becomes necessary, such measurements will be determined utilizing Level 3 inputs. ​ ​ 12. COMMITMENTS AND CONTINGENCIES ​ NX Gold Exploration Payment ​ On March 22, 2022, we made a payment of $ 3.2 million to a subsidiary of Ero Copper Corporation (“Ero”) as part of our commitment to support the achievement of success-based targets related to regional exploration and mineral resource additions. This payment has been recorded to exploration stage stream interests (Note 3) within Stream and royalty interests, net on our consolidated balance sheets. As of March 31, 2022, $ 6.8 million of additional exploration and mineral resource addition payments remain if Ero meets certain success-based targets through calendar 2024. Refer to our Transition Report for further information on the NX Gold stream acquisition. ​ Ilovica Gold Stream Acquisition ​ As of March 31, 2022, our conditional funding schedule of $ 163.75 million, as part of the Ilovica gold stream acquisition entered into in October 2014, remains subject to certain conditions. ​ ​ ​ ​ 16 Table of Contents ​